Yes, I do this, you need either Mini-DVI to VGA Adapter or Mini-DVI to DVI Adapter depending on what kind of inputs your monitor has. If it has both, you want DVI. The adapter plugs into the small port to the right of the ethernet port, then you can hook the normal monitor connectors into both. Hope this helps.

Well if you're opening a lot of programs it will slow it down a fair amount.. but really that depends on the program.
If it's just lots of windows from one program that will also slow it down but probably not as much as multiple programs
If it's just four or five programs it shouldn't slow it down too much.
I usually have 6 programs on my iBook (When it wants to work) and it only has 1GB of ram so I imagine you should be fine... and you also have a dual core cpu so even better!

Uh, no it doesn't slow down a Macbook at all to be hooked up to an external monitor. I routinely hook up a 22" widescreen LCD to mine. I have it set up to put the menu, all open windows, and leave the Dock on the built-in LCD and there is no slow-down of any kind. The graphics card handles it fine, UT2004 plays fine, and DVDs look spectacular.

I switch between this set-up and going mobile every day. No difference in speed.